Many facets of labor compliance are misinterpreted or often overlooked, but one of the biggest risks and cost factors for a company throughout the life of a project is field labor.
Getting ahead of labor compliance and its requirements are keys to success for any construction business.
In recent years, labor compliance has become a hot topic mostly in public works, but it flows into private sector projects as well. This article is intended to help construction finance and accounting professionals navigate the basics of labor compliance and how it affects different aspects of construction projects, including:
- Contract requirements
- Timekeeping and timesheets
- Project management
- Certified payroll reporting
- Billing
- Job costing
- Subcontractor labor compliance
- Collections
Contract Requirements
Labor compliance is a contract detail, not an assumption. Overall, there should be no gray areas when it comes to contract requirements. Construction contracts typically require contractors and subcontractors to comply with various requirements relating to field labor, such as certified payroll reporting, wage determinations, project labor agreements, and required staffing demographics (e.g., local hire agreements or disadvantage workers).
Another common labor compliance contract requirement is Owner Controlled Insurance Plans (OCIP), which is directly related to onsite work performed. There may also be requirements that involve who will be staffed in the field to complete certain scopes of work.
Certain states also have requirements on journeyperson/apprentice ratios, so be sure to check these details with your state and in the contract.
Timekeeping & Timesheets
Since proper timekeeping applies to labor job costing and certified payroll reporting, it impacts the bottom line. Spending time training key field employees and payroll administration staff on timesheets and accurately reporting field labor hours is key.
Utilizing dailies in the field is a great tool as well. Training the field team to keep track of what scope they are performing, how many hours it takes, what delays may occur, or what challenges they could face can be tracked on a field daily and can help in many ways.
For example, an estimator may think it will take a certain number of hours to perform a task, but if it takes more or less time, then future bidding and understanding field labor can be improved. Also, if a challenge is tracked on a field daily sheet with proper details, this can help you foresee other challenges. This all ties in with time delays or even being ahead of schedule.
To help field workers accurately record their timekeeping:
- Have a uniform document to ensure accuracy, whether paper or electronic timesheets.
- Train field crews on what is expected to be documented in each area of the timesheet.
- Provide the field crew with the project, job number, and name.
- Communicate to crews the labor cost codes or scope of work details that should be used on the timesheet, if applicable.
- Hold a preconstruction field crew meeting to discuss crew size, project schedule, and expectations.
Project Management
Project managers (PMs) are the driving force of the field and project schedule. In many cases, the PM has the relationship with the customer; they communicate important information between the customer and the internal teams.
It is imperative to have a project management team that also understands the importance of the project labor compliance requirements per the contract.
When staffing the project with specific labor compliance requirements, it can often be the project team that assists with this task. Training the project team on labor compliance is a great benefit to being compliant, and compliance leads to contractors receiving consistent payments.
Certified Payroll Reporting
Certified payroll reporting is a common requirement for public and private labor compliance.
For prevailing wage jobs, this report is required to verify that the correct wages and fringes are being paid to employees and/or unions.
Certified payroll reports also track if the hours bid to complete a project coincide with hours performed in the field. These reports help GCs verify the labor and scope of work being performed is accurate in the field.
When certified payroll reporting is required, there is usually a labor compliance packet supplied to contractors to complete prior to working onsite. This paperwork can often seem overwhelming, but carefully review and complete each document, as a blank field can lead to rejected documents. Some states are stricter than others on this requirement, so be sure to refer to each contract and state requirement for details. Also based on customer requirements, there are various reporting products that may be used.